Navigating Fintech in Latin America

By: Alexander Trueba and Christopher Hernandez

Over the past 10 years, fintech has transformed the financial landscape of Latin America by providing innovative solutions to the banking sector, as well as affordable and accessible financial services to many across the region. With a population of over 650 million and a glaring need for improved financial inclusion, investors have flocked to Latin America to service an underserved market with vast potential and consumer demand. The industry’s meteoric growth has been driven by several factors, including an ever-improving digital infrastructure, increased access to investor capital, and a more supportive regulatory environment. These factors, along with other one-off occurrences like the COVID-19 pandemic, have given rise to a multitude of start-ups and mature entities propelling fintech’s prospects in an upward trajectory.


The fintech landscape in Latin America is diverse, with many companies emerging in various sub-sectors such as digital payments, neo banking, and alternative finance.

Specifically, digital payments and neo banking have seen the most significant growth. With smartphone penetration rates continuing to rise, digital payments have become an increasingly popular way to transfer money and pay for goods and services. According to the International Monetary Fund (IMF), recent figures place the number of digital payment service users in region at over 300 million, while it is estimated that between 2017 and 2021 digital transaction value grew over 140% to US $215 billion. At the end of 2022, it was estimated that cash represented just 37% of all formal retail payments in Latam’s largest six markets, vs. 70% in the pre-pandemic era. Companies such as Mercado Libre, the largest e-commerce platform in Latin America, have become major players in the sub-sector – adding to the breadth of their digital capabilities. Case in point is Mercado Pago, the company’s digital wallet. It allows users to make purchases, pay bills, and transfer money digitally – a concept foreign to the Latin American market a decade ago. More than 10% of all E-commerce spending in Latin America is now made through digital wallets.

Meanwhile, the number of digital banks in the region has grown to approximately 60. These neobanks are disrupting the traditional banking industry, increasing competition, and reducing the cost of services, which in turn is growing accessibility to unbanked and underbanked consumers and SMEs. The majority of these banks originate out of the larger traditional markets of Brazil, Argentina and Mexico but can be found throughout both South and Central America. In fact, some of the world’s largest digital banks are based in Latin America, such as Brazil’s Nubank and C6, and Argentina’s Ualá. Nubank in particular stands out. Founded in 2013, it has single-handedly transformed Brazil’s banking industry. It currently has over 70 million customers throughout Brazil, Mexico, Argentina, and Colombia, and has raised almost US $4 billion in funding. When the digital bank went public in late 2021, it was valued at US $41 billion (a record market capitalization for a digital bank). Major investments from Berkshire Hathaway and SoftBank highlight its investor portfolio.

Alternative finance is also finding promise and growth in the region, particularly in the small and medium size enterprise space where perceived risk and lack of traditional financing are more prevalent. Digital platforms that promote and facilitate peer-to-peer lending and crowdfunding are growing in numbers. According to the IMF, there were over 500 alternative finance startups in Latin America at the end of 2021, with Brazil, Mexico, and Chile at the forefront. These platforms can provide a faster and more convenient way to obtain loans or capital, particularly for small business owners and entrepreneurs.

Growth & Funding

Fintech’s rise in Latin America, at its core, can be attributed to a lack of financial inclusion. These circumstances presented a significant opportunity for fintech companies to provide services to an underserved population. This gaping need, coupled with an improving digital ecosystem all contributed to its ascendency. Consumers in Latin America are more connected than ever. According to the IMF, the region’s digital penetration rate now hovers close to 75%, up from 34% in 2010.

Additionally, the COVID-19 crisis shone a light on the importance and relevance of the fintech industry in Latin America. A emphasis on mobile technologies brought upon by the pandemic fueled reliance on fintech more than ever before. Entities were forced to trust and rely on these technologies to keep their operations running remotely. Individuals were forced to lean more heavily on fintech services for such basic things as grocery deliveries and expense payments. E-Commerce boomed. Contactless payment services and digital banking helped people remain socially distant while still conducting their everyday lives. Once the COVID clouds parted, a new normal was established. Latin American regulators began to prioritize the importance of fintech in the local economic landscape – easing restrictions on digital lending and digital payments. Many times, governments leaned on these same financial tech services to distribute relief and stimulus – building confidence in their capabilities and efficiencies.

Along with normalizing digital technology, COVID contributed to a large financing boom in the region. Although private equity and venture capital firms were indeed investing in fintech in the region prior to COVID, the pandemic surely did help accelerate flow of capital. Once an industry driven by startups and rounds of friends and family investments, fintech has graduated to a powerhouse market, attracting billions of dollars from private equity firms and venture capitalists. Financial technology firms in the region outperformed other industries from a funding perspective, leading the fintech market to double in size from 2018 to 2021. Much of the capital was invested from abroad, as the Inter-American Development Bank (IDB) claims that nearly two-thirds of fintech’s received overseas support – primarily from the United States and Europe, as well as Asia to a lesser extent.

Fintech is no longer the future, but the present for Latin America. Though many advancements have been made, opportunity is still ripe as 70% of the region’s population is estimated to remain unbanked, while nearly 60% of point of sales transactions still occur in cash. As it continues to grow and mature, we can expect to see increased innovation and investment, further improving financial inclusion and expanding access to capital to consumers, entrepreneurs, and business owners alike.